Danakali Limited (“Danakali”, ASX:DNK) has shortlisted three firms that will progress to a competitive bidding process for the engineering, procurement and construction (EPC) contract for the Colluli Potash Project located in Eritrea.
The shortlist comprises companies that are internationally renowned engineering with significant experience in Africa, Eritrea and potash.
The shortlisting follows an invitation for expressions of interest for the EPC contract which already drew strong interest.
A site visit for the engineering firms is planned in early October.
Colluli is one of the most advanced greenfield sulphate of potash (SOP) projects globally. It has an exceptionally long expected mine life, unrivalled product diversification potential and significant upside.
Paul Donaldson, managing director, commented:
“We are happy to have successfully reached the significant and exciting milestone of initiating the formal bidding process with highly reputable and experienced groups for the EPC contract for the project.
We are delighted with both the level and the quality of interest we have received for the EPC contract for the Colluli Project. We are looking forward to hosting the shortlisted parties at the site visit in early October.”
The definitive feasibility study on Colluli was completed in November 2015 and the project is currently awaiting mining license approvals.
Danakali has a 50% equity interest in Colluli through a joint venture with the Eritrean National Mining Company.
The study forecast the project to have industry leading capital intensity, bottom quartile operating costs and an ore reserve of 1.1 billion tonnes.
Funding discussions are underway and the company has signed memorandums of understanding for 800,000 tonnes of SOP per annum and 200,000 tonnes of sulphate of potash magnesia (SOP-M) per annum.
During June 2016, representatives from the relevant government ministries assigned to the license approvals process visited the Colluli site to commence project evaluation.
Danakali plans to complete a second round of post definitive feasibility study stakeholder engagements.
This will be a key milestone in advancing the project towards development.
There will also be a focus on the continuation of off-take and financing discussions, and the identification of potential off-takers and volumes for SOP-M.
Danakali maintains research coverage from three Australian brokers.
All three brokers have Buy recommendations with price targets ranging from $0.50 to $1.03.
Shares in Danakali are trading at $0.375.
In November 2015, Danakali released a highly positive DFS for Colluli which demonstrates industry leading capital intensity and lowest development costs relative to all SOP projects at DFS level in the world. Bottom quartile operating costs are predicted. Mine life is estimated at over 200 years at the DFS production rate, providing the project with substantial growth potential.
The Colluli Mining Share Company has submitted an application for a mining license which is currently progressing through an approvals process. The Colluli Mining Share Company is focussing on developing a multi-agri commodity and salt business using the principles of modularity, risk mitigation and full resource utilisation. The shallow mineralisation, close proximity to coast, highly favourable suite of potassium bearing salts and multi agri-commodity diversification potential combine to make Colluli positively unique. It is an unrivalled greenfield project and has no peer.
Colluli is a multi-decade potash project in the world and demonstrates superior economic outcomes in comparison with other advanced potassium sulphate projects. In 2015, a JORC 2012 compliant 300 million tonne high quality rock salt resource was quantified. The salt, which has an average grade of 97%, is intended to be extracted to access the potassium bearing salts. The potassium bearing resource of the Danakil Depression has the unique capability to produce three of the four potash types in the global potash market which comprises potassium sulphate (sulphate of potash or SOP), potassium chloride (muriate of potash or MOP), potassium magnesium sulphate (sulphate of potash magnesia or SOP-M) and potassium nitrate (nitrate of potash or NOP).